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Goldman, Deutsche Lead Record Apple Debt Offering for Dividend Boost

Updated from 3:15 p.m. ET to include closing Apple share prices and additional data throughout.

NEW YORK ( TheStreet) -- Apple (AAPL - Get Report) has completed the biggest debt issuance in corporate history, as the iPhone maker uses surging investor demand for high quality debts to dramatically increase its share buyback and become the largest dividend payer in the world.

Apple, on Tuesday, raised $17 billion in debt financing, a record for a non-financial corporate issuer as the company plans to return billions in undistributed cash to shareholders.

The debt will help Apple return money to shareholders without incurring a tax hit for repatriating any of its over $100 billion in overseas cash.

Apple sold $5.5 billion in 10-year notes at a spread of 75 basis points over the Treasury rate, while it will be selling $3 billion in 30-year bonds at a spread of 100 basis points over the Treasury rate on Tuesday, according to Bloomberg data.

Apple also sold $1 billion in three-year floating rate notes, $1.5 billion in three-year fixed rate notes, $2 billion in five-year floating rate notes and $4 billion in five-year fixed rate notes, the data show.

Goldman Sachs (GS - Get Report) and Deutsche Bank (DB - Get Report) led Apple's (AAPL - Get Report) six-part debt offering, which came in six maturities starting in 2016 and ending in 2043.

Spreads on Apple's offering appeared to narrow through Tuesday, given strong demand for the company's debt and initial media reports of higher spreads on Tuesday morning. Media reports indicate demand for Apple's issuance exceeded $50 billion.

Apple shares rose nearly 3% in Tuesday trading to $442.78.

In second-quarter earnings, Apple said it will increase its quarterly dividend by 15% and increase its share buyback authorization by $50 billion to $60 billion.

Earlier in April, David Einhorn of hedge fund Greenlight Capital applauded the iPhone maker's decision to finance the dividend increase and boost to its share buyback authorization, after waging and then withdrawing a battle with the smartphone pioneer to pay out a perpetual preferred stock dividend.

"We applaud Apple's decision to borrow money and return excess capital to shareholders, an idea that was off the table only months ago," a Greenlight Capital spokesperson said on behalf of the fund on April 23.

"This positive development represents a more shareholder friendly capital allocation policy and demonstrates the conviction of Apple's management and board in the Company's future."

Greenlight Capital titled its preferred stock proposal iPrefs, however, the hedge fund withdrew a shareholder lawsuit surrounding the payout earlier in 2013.

Apple said in earnings it will increase its quarterly dividend to $3.05 a share as part of a plan to return $100 billion in cash to shareholders by the end of 2015.

The company's dividend yield is about 3% based on Apple's current share price of about $404. Apple's annual dividend payments will be about $11 billion as a result of a 15% increase to its payout.

"Apple is among the largest dividend payers in the world, with annual payments of about $11 billion," the company said of its increased dividend payout.

Apple previously said its bond offering, filed on Tuesday, will be used to pay for the company's increased dividend and its $60 billion share repurchase authorization.

"In conjunction with the expanded return of capital program, the Company plans to borrow and expects to announce more details about this in the near future," Apple said on April 23.

The company's annual dividend payments will be about $11 billion as a result of a 15% increase to its payout, topping Dow stalwarts such as ExxonMobil (XOM) and AT&T (T), according to an April analysis from Moody's.
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DB $18.96 0.00%
GS $164.11 0.00%
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